SCINEX CORPORATION

The Company's core Information Media business depends on the Telephone Directory Information Database (TDIS) usage agreement with NTT West. If a cause for contract termination arises, such as a violation of personal information protection guidelines, publication of telephone directories would become impossible, materially affecting business performance. In addition, consolidated subsidiary L-Net depends on a transport outsourcing agreement with Japan Post, and termination of this contract would make it difficult to continue the DM Solutions business. Although no information management incidents or troubles have occurred to date, the Group continues to implement measures such as maintaining handling operation manuals and controlling access to premises.

The Group is a personal information handling business operator that processes registered customer information and recipients' personal information in the DX Support business and Logistics business. If information leakage occurs due to unauthorized external intrusion or intentional or negligent acts by officers or employees, this could result in claims for damages and loss of trust, affecting financial position and business performance. In the Information Media business, this risk is particularly significant as it is directly linked to the potential termination of the TDIS agreement. The Group has implemented measures such as establishing internal rules, training officers and employees, and obtaining Privacy Mark certification, but complete prevention cannot be guaranteed.

Cyberattacks, unauthorized access, computer virus infections, natural disasters, or employee negligence could result in the leakage of confidential or customer information or prolonged system downtime, potentially leading to suspension of business activities and damages, thereby impairing performance and credibility. The Group has implemented measures such as disseminating information security regulations, various security measures, building backup environments, and enrolling in cyber insurance, but complete countermeasures cannot be guaranteed. Additional expenditure on security measures could also affect business performance.

With the growing penetration of smartphones and tablets, internet use as an information medium has become widespread, raising concerns about declining usage frequency and sales of print publications in the Information Media business. The Company is responding through web promotion, e-books, and AI chatbots for local governments, among other initiatives, but changes in the business environment may affect business performance and future business development. Transitioning away from a revenue structure heavily dependent on print media remains a challenge.

As part of its DX response, the Group is working to expand new ICT-based businesses such as the

Publications in the Information Media business use printing paper, ink, and other materials as raw materials, and raw material prices have risen due to geopolitical risks such as Russia's invasion of Ukraine and heightened tensions in the Middle East. While the Group currently absorbs these costs through measures such as cost reductions, if market prices rise further in the future, the Group may be unable to fully absorb the increase in raw material costs, potentially affecting business performance.

The Group is actively pursuing the expansion of existing and new businesses through M&A. If issues that cannot be identified through prior due diligence arise, such as contingent or unconfirmed liabilities of target companies or failure to achieve business plans, this may necessitate goodwill impairment, potentially affecting business performance and financial position. The Group examines risks by conducting prior investigations of finances, legal matters, labor, and business operations in connection with M&A, but there is no guarantee that all risks can be eliminated.

The Company has its head office in Osaka City, a manufacturing base in Matsusaka City, Mie Prefecture, and sales offices in 36 prefectures. If a large-scale disaster occurs in any of these areas, equipment damage, power outages, system failures, and other issues could significantly affect business operations, potentially impacting business performance and financial position. While the nationwide distribution of offices provides some risk diversification, there remains a risk that multiple locations could be affected simultaneously in the event of a wide-area disaster.

Each of the Group's businesses is subject to regulation under numerous laws and guidelines, including the Unauthorized Computer Access Law, the Act on Regulation of Transmission of Specified Electronic Mail, the Act against Unjustifiable Premiums and Misleading Representations, the Pharmaceuticals and Medical Devices Act, and the Antimonopoly Act. If new constraints are imposed on business operations due to the enactment or amendment of laws, revocation of licenses or permits by regulatory authorities, or the formulation of new guidelines, or if existing regulations are strengthened, this may affect the Group's business and performance.

Costs associated with climate change response, such as survey costs, rising raw material prices, capital expenditure for equipment to comply with strengthened CO2 reduction obligations, and increases in manufacturing costs and selling, general and administrative expenses due to rising fossil fuel prices, may affect the Group's business condition. In addition, failure to respond to customer demands related to climate change response could damage the Group's credibility, and investors' perception of insufficient initiatives could harm the Group's image.